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Fees in Criminal Cases

Tony Danos would offer lump sum fees in most cases which clients like so there are no hidden extras.

See the following article which was reported in the Law Institute News

Ride sharing service Uber's valuation of $US62.5 billion ($A85.7 billion) would seem to indicate the company is doing something right. Features such as the ability to order on a dedicated application (app), ability to review the past performance of your driver, ability to track a car's progress to your destination, the pre-estimate of your fare and the direct debiting from your credit card without needing to hand over cash have many people raving.

But one of the most controversial aspects of Uber's offer is its "surge" pricing. This is a mechanism which builds a market for personal transport and charges more when there is heightened demand or reduced driver appetite. It has received condemnation from some quarters, with stories of customers being charged up to nine times the usual fare at peak times, like New Year's Eve.

It turns out, however, this part of Uber's business model is one of its key success factors.

Surge pricing encourages more drivers into the market when required and keeps them there for as long as required. It also allows customers to make a time/money trade off. If you want transport in a hurry, you can pay the surge pricing. But if you are happy to spend some more time at a restaurant or bar, wait for the crowd to dissipate and therefore the surge pricing to cease, you can sacrifice time for money.

In the data that Uber has collected since the inception of surge pricing, it has become clear that we all have biases when it comes to money and very few of us are strong at rationally comparing numerical options.

For example, paying nine times the fare for a ride home on New Year's Eve sounds a bit toppy, but a fare which would normally be, say, $70 costing $630 feels completely outrageous, notwithstanding that they are arithmetically the same.

Another interesting anomaly is that sensitivity to surge pricing does not proceed in a straight line.

There is a big drop off in demand for Uber when there are quite small increases in price, say 1.2 times the standard fare. This is despite the fact that this is often still markedly cheaper than a taxi for the same distance.

Further more people are likely to accept a 2.1 times surge fare than a 2 times fare. This is because at 2 times, customers get the feeling that the fee increase is arbitrary and capricious, whereas 2.1 times feels like there must be science in the price determination.

There are some interesting changes emerging in the application of professional fees which are parallels to Uber's pricing model.

Financial Advice

Many investors are attracted to a flat-dollar fee model, where an adviser will work to an agreed fee for a level of one-off or ongoing service, rather than charging their fee as a percentage of how much money you have.

This fixed-fee approach offers clarity about what advisers can genuinely control and the value they are able to deliver. It also means that some of the hallmarks of poor advice, such as excessive gearing and excessive risk taking, are avoided.

Interestingly, though, fixed-fee advisers also talk about "sticker shock", which is comparable to the reverse of New Year's Eve surge pricing. For example a client with a $1 million portfolio is often happier to pay a one per cent per annum advice fee than a fee of, say, $7,500 per annum, even though the latter is not only a substantially lower fee but also unlikely to increase as your investments grow.

It is important to think about how you want to work with an adviser and what you are getting, before falling into the mental accounting trap of feeling like a small percentage is less than a specified dollar amount.

Legal Services

One of the big complaints about traditional lawyers is that while a per-hour fee schedule is known, it's unclear how much time any given matter will take. There is often a nasty surprise at the end of a legal engagement where fees are much higher than expected.

Some innovative law firms are moving away from time-based billing and are moving to fixed fees per matter, with payment upfront.

This is like moving away from the soul-sapping experience of watching the metre in a taxi tick over in heavy traffic, in favour of the known outcome of an Uber fare.

Paying upfront means that the final interaction between client and lawyer is hopefully the positive delivery of the required service, rather than a haggle over the bill.

A final interesting nugget of behavioural information Uber has collected is that if you have less than 5 per cent battery life on your mobile phone, you are much more likely to accept surge pricing at any level.

This aligns with what we experience with professional services – if you feel under pressure or that you are in trouble, you will reach for any solution, even if it's not great value. It's why we are more likely to buy lottery tickets when we sense job insecurity, or find the money for a criminal barrister.

By getting advice earlier and being open to new approaches, you might find that not only do you pay a better price, but you experience superior value.

Catherine Robson is a financial planner with Affinity Private.

AFR Contributor

Read more: http://www.afr.com/personal-finance/what-ubers-surge-pricing-can-teach-us-about-new-approaches-to-professional-fees-20160530-gp7fpx#ixzz4AOSHpori

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